Bailout bill fails initial House vote

WASHINGTON (AP) - The House today defeated a $700 billion emergency rescue package, ignoring urgent pleas from President George W. Bush and bipartisan congressional leaders to quickly bail out the staggering financial industry.

On Wall Street, the Dow Jones industrials plummeted as much as 630 points after the 228-205 vote to reject the bill was announced on the House floor.

Buffeted by unusually aggressive pressure from the White House, House members this morning debated the hotly contested legislation as a key architect conceded its unpopularity.

"Many of us feel that the national interest requires us to do something which is, in many ways, unpopular," said Rep. Barney Frank, the Financial Services Committee chairman. "It is hard to get political credit for avoiding something that has not yet happened."

The rescue plan was the product of marathon bargaining over the weekend among various House and Senate representatives.

Bush said in a White House appearance this morning that "every member of Congress and every American should keep in mind that a vote for this bill is a vote to prevent economic damage to you and your community."

"With this strong and decisive legislation," he said, "we will help restart the flow of credit so American families can meet their daily needs and American businesses can make purchases, ship goods and meet their payrolls."

As debate opened, Frank, D-Mass., called the measure "a tough vote" but a necessary one to stave off a financial meltdown. It lets the government buy sour assets - mostly mortgage-backed securities - from struggling financial institutions in a bid to clear out clogged avenues of credit for businesses and individuals alike.

At the White House, spokesman Tony Fratto confirmed vigorous efforts to get the bill through.

Fratto said this morning that Bush, Vice President Dick Cheney, Treasury Secretary Paulson, White House chief of staff Josh Bolten and other top officials were contacting House members in an effort to rally support, and that the president himself had a call list of "a couple dozen members."

Fratto said Bush was telling aides some of those he'd talked to were committed to voting for the bill while "others remained skeptical."

With their dire warnings of impending economic doom and their sweeping request for unprecedented sums of money and authority to bail out cash-starved financial firms, Bush and his economic chiefs have focused the attention of the world and the markets on Congress, said Republican Rep. Paul Ryan of Wisconsin.

Without the bill, Ryan added, "the worst is yet to come."

"We're in this moment, and if we fail to do the right thing, Heaven help us." he said.

As Democratic and Republican leaders hunted for votes, leaning on lawmakers to take a political hit for the good of the country, Ryan said, "We're all worried about losing our jobs. ... Most of us say, 'I want this thing to pass, but I want you to vote for it - not me.' "

Two leading players also spoke early today, lobbying on morning television news shows for approval of a package deeply unpopular with a public angry that taxpayer money will save Wall Street firms from heavy risk-taking. Thousands of angry phone calls, e-mails and letters have poured into Capitol Hill from constituents. Supporters essentially acknowledged that it was a hold-your-nose-and-vote matter.

Critics on the left and right said Congress was being stampeded into hasty action on a plan that wouldn't make a dent in the nation's economic woes, which have at their root a subprime mortgage meltdown and the bursting of the housing bubble, followed by a wave of foreclosures.

"Like the Iraq war and the Patriot Act, this bill is fueled on fear and hinges on haste," said Democratic Rep. Lloyd Doggett of Texas.

Republican Jeb Hensarling of Texas, a leading conservative, said the bill puts the country "on the slippery slope to socialism. If you lose your ability to fail, soon you will lose your ability to succeed."

Sen. Chris Dodd, D-Conn., said failure to act would spread the contagion of frozen credit markets even further.

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